MNCS Morning Navigator 03 November 2020

Global Market Highlight

DJIA rose by +1.60% on Monday (02/11) followed byS&P 500 (+1.23%) and Nasdaq (+0.42%). Global stock exchanges managed to strengthen, driven by investor optimism over the results of today's US presidential election. Preliminary survey results show Biden is superior in 4 key states, namely Pennsylvania, Wisconsin, Florida and Arizona. Even so, the threat of political turmoil still exists if there is no single dominant winner. Fiscal stimulus discussions could also be delayed later. On the other hand, market players are also awaiting the direction of the Fed's benchmark interest rate policy by Powell on Thursday. Powell is projected to keep interest rates at 0-0.25% for an extended period.  Not only that, labor data as of October will also affect the rate of global exchanges.. Moreover, the market will look forward to several data releases today, such as: 1) US Presidential Election; 2) Eurozone Eurogroup Video Conference; 3) US Factory Orders.

Domestic Update

The IHS Markit Indonesia Manufacturing PMI rose to 47.8 in October 2020, from 47.2 a month earlier, as the large-scale social restrictions (PSBB) in Jakarta were loosened in mid-October, with both output and new orders falling at softer rates. Sentiment strengthened on hopes that market conditions will return to normal. (Markit Economics)

BPS releases an inflation of 0.07% in October 2020, with the Consumer Price Index (CPI) of 104.92. The inflation rate for 10M20 is 0.95% YoY vs 1.44% in 10M19. The core component in October 2020 experienced inflation of 0.04%. The core inflation rate for 10M20 is 1.50% YoY vs 1.74% in 10M19.

Company News

1.       ERAA IJ posted sales of IDR23.17 trillion in 9M20, slightly down by 1.8% YoY. Meanwhile, sales of cellular phones and tablets were still the main contributor to the company's sales and decreased by 5.3% YoY to IDR17.32 trillion. Voucher sales rose by 8.7% YoY to IDR3.17 trillion, computers and other electronic equipment grew by 15.29% YoY to IDR1.01 trillion, and sales of accessories and others rose by 10.25% YoY to IDR1.65 trillion. ERAA also managed to reduce COGS by 3.53% YoY. Thus, ERAA managed to book a significant profit growth of 78.2% YoY to IDR295.11 billion in 9M20 (Market Bisnis). MNCS Comment: We note that IMEI implementation followed by business margin improvement would lead ERAA to a prosperous year ahead. Moreover, we expect lower COGS and finance costs should support earnings. ERAA is currently traded at 14.51x/1.12x PE/PBV.
2.       BSDE IJrevenue reached IDR4.28 trillion (-18.18% YoY) in 9M20. While net profit took a dive, standing at IDR469.55 billion (-79.67% YoY). Furthermore, pre-sales revenue reached IDR4.7 trillion in 9M20, equivalent to 65% of the pre-sale target set by the company this year of IDR 7.2 trillion (Market Bisnis). MNCS Comment: The declining performance of the financial statements in 9M20 was due to the achievement of marketing sales in 1H20 that was not as expected.  However, marketing sales on 9M20 has the potential to improve BSDE's performance for the next year. BSDE is currently traded at 29.76x/0.62x PE/PBV.
3.        LPKR IJ revenue reached IDR 8.58 trillion which edged up 0.24% YoY in 9M20. However, due to the increasing expenses, LPKR posted a net loss of IDR2.34 trillion which swelled from a net loss of IDR1.72 trillion as of 9M19. Furthermore, marketing sales has reached IDR 2.28 trillion in 9M20 or 91.2% of the target of IDR2.5 trillion in FY20E (Market Bisnis). MNCS Comment: LPKR recorded a good performance, while the property sector declined.  The achievement of marketing sales will also help improve LPKR's performance for future financial reports. LPKR is currently traded at 0.36x PBV.

IHSG Updates

JCI dropped by -0.26% to 5,115.13 on Monday (02/11) followed by net foreign sell reaching IDR496.31 billion. JCI weakened following the adjustment to the declining global indices as it awaits for the US election. Six out of nine sectors decreased although this time mining sector increased due to stellar performance of the companies namely ANTM and INCO. Furthermore, the market seemed to ignore the positive data release from PMI Markit manufacturing and inflation rate which increased in October 2020, showing a slow but sure recovery. Meanwhile, the Rupiah exchange rate was weakening at IDR14,640. We estimate JCI will move in the range of 5,063 – 5,150 while waiting for 3Q20 GDP data release. Today's recommendation: BMRI, INDY, JPFA, PWON.

Corporate Action

Cum Date Dividend: PALM (IDR33/share), IMPC (IDR10/share)

Disclaimer On                                                     

BMRI, INDY, JPFA, PWON, ERAA, BSDE, LPKR